Retail growth determined by a rise both in tourist expenditures and purchasing power of locals

The latest retail trade data point to a rise in expenditures, renewing the demand level that had dropped in October. The retail sales turnover, according to seasonally adjusted data at constant prices, grew 1.4% in November. Year-on-year, a high growth rate (8.7%) was retained.

In September and October trade structure a higher demand for durable goods was once again the case. What are the November results in a breakdown by a group of goods? The increase in foodstuffs sales in November still lags behind the rise in the demand for non-food items. In the demand for durable goods, however, the situation is not uniform. The rise in the turnover of non-food items has been fostered by the demand for furniture, lighting devices and other household items. In the sales of metal products, instruments, construction materials and plumbing there has been only a small rise. In the sales of automobiles, on the other hand, a substantial drop was observed after a rise of two months. This drop, however, cannot be considered as characterizing long-term trends: the overall dynamic in this sector still involves a resumption of small demand after a slowdown in the first half of the year.  

Overall the rise in expenditure is promoted by an improved purchasing power of the population, as the number of the employed and average salary rise and the price rise impact on the purchasing power dwindles. The sales amounts, however, are affected by other factors as well, including purchases by legal persons and, particularly importantly as of the second half of 2010, tourist expenditures.

If the very number of tourists grew rapidly in 2010-2011, the possible increase in sales amounts in 2012 is more related to a rise in the number of tourists from Russia and their travel and spending habits. 

  • If we look at the data on the stays of foreign guests in hotels and other tourist shelters, we see no substantial increase in the number of tourists in 2012; in the third quarter, there was even a year-on-year drop.  In the first three quarters of 2012, the number of tourists from Lithuania, Finland, Sweden and Norway dropped, whereas the  increase in the number of tourists was on account of travellers from Russia;
  • The statistics on overnight stays of tourists are improved by the tourists from Russia on average staying longer in Latvia. It should be noted that some of the Russian guests do not use tourist facilities but stay in their own properties whose purchases have been promoted by the changes in policies regulating the obtaining of residency permits. The home improvements purchased also contribute to the overall rise in sales volumes.

What are the conclusions to be drawn from all this? In evaluating the relation of retail data to private consumption, we should keep in mind also these other factors affecting sales volumes. The discrepancies in the dynamics of these indicators cannot always be explained by hidden incomes of the population and sales volumes. Nevertheless, this too is an important aspect to which points the still low reflection of the demand for fuel in the official statistics.

As far as the impact of guests from Russia on the sales volumes and the tourism branch is concerned, the number of guests, the average stay and expenditures could be particularly high in December and January. The higher heating bills, on the other hand, might have lessened the purchasing power of the Latvian population.

A gradual growth is expected in this branch both in the coming months and in 2013 overall, but the rate of growth is likely to be slower than in 2012.

APA: Rutkovska, A. (2022, 27. may.). Retail growth determined by a rise both in tourist expenditures and purchasing power of locals. Taken from https://www.macroeconomics.lv/node/2157
MLA: Rutkovska, Agnese. "Retail growth determined by a rise both in tourist expenditures and purchasing power of locals" www.macroeconomics.lv. Tīmeklis. 27.05.2022. <https://www.macroeconomics.lv/node/2157>.

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